Author Topic: need formula for retirement calc  (Read 3298 times)

August West

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need formula for retirement calc
« on: February 04, 2013, 04:40:42 PM »
I remember reading here or at ERE about a formula that tells you roughly how many additional months you would need to work before achieving FI if you make a purchase.  It was either for evaluating a single purchase or a monthly cost - I can't remember which.  Does anyone know what I am talking about?

August West

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Re: need formula for retirement calc
« Reply #1 on: February 17, 2013, 01:02:34 AM »
I was playing with a calculator and think it may have been this:  when considering a monthly cost multiply it by 300.  That tells you how much you need to have saved to cover the cost at 4% withdrawal.  Then you can divide by your real wage (actual wage - job related expenses) to figure out how many hours of your life you need to trade for the monthly cost.

Does anyone recall an article here or on ERE that deals with calculations like this?  I cannot seem go find it.

arebelspy

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Re: need formula for retirement calc
« Reply #2 on: February 17, 2013, 08:08:03 AM »
There's a few things you could be referring to.  I'm guessing it's possibility 3, which I also will link to a cool tool for.  I suppose I could just paste that single link as a reply, but I think reading through the others may be instructive or helpful for some people reading this, so why not?

Possibility 1:
In order to calculate the amount of time something would cost you if you had instead saved the money and invested it, MMM's rough calculation is:
Quote
to calculate a weekly expense compounded over ten years, multiply the price by 752
for a monthly expense, multiply by 173
(From this article: http://www.mrmoneymustache.com/2011/04/15/getting-started-3-eliminate-short-termitis-the-bankruptcy-disease/ and referenced here: www.mrmoneymustache.com/2012/07/15/two-fun-tools-from-the-mmm-software-department/)

Possibility 2:
To find how long you'd have to save for a one time expense, you need to divide the cost of the item by your hourly true rate.  This will give you the number of hours extra you'll have to work at the end of your career to have that thing.

Possibility 3:
To find out how long you'll have to work for a reoccurring expense, first figure out how much that thing will cost you annually (if it's a once a year thing, you're done.  Weekly, multiply by 52. Daily multiply by 365, etc.).  Then multiply that annual cost by 25 (if you're shooting for a 4% SWR) or 33 (if shooting for a 3% SWR), which will give you the total amount you need in your stache to cover that annual expense.  Then divide that number by your true hourly wage, which will give you how much longer you have to work to get that number.

This is a great tool to help you quickly do that last possibility: TLDR: http://networthify.com/calculator/real-cost

If none of those was quite it, please clarify and we'll try to figure it out.

Hope that helps!
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August West

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Re: need formula for retirement calc
« Reply #3 on: February 18, 2013, 12:04:33 AM »
THANK YOU!  I think possibility 1 is what I was looking for but possibility 3 is very cool.

arebelspy

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Re: need formula for retirement calc
« Reply #4 on: February 18, 2013, 08:31:30 AM »
Cool, glad that was it.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

unplugged

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Re: need formula for retirement calc
« Reply #5 on: February 18, 2013, 09:50:12 AM »
Arebelspy, I am the one who im'd you about a calculator as well. Thanks for your help and I think I found the one at unbury.me

Is there a place here where we can post tools like these?

arebelspy

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Re: need formula for retirement calc
« Reply #6 on: February 18, 2013, 09:59:06 AM »
Arebelspy, I am the one who im'd you about a calculator as well. Thanks for your help and I think I found the one at unbury.me

Is there a place here where we can post tools like these?

They're posted in various threads around here.  I don't think anyone has taken the time to compile them into one single reference thread.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.